Q: You spent the last year living in Iran, right when economic sanctions against the country reached new heights. How did you see the Iranian economy changing and responding to these sanctions over the last year?

Hooman Majd (HM): Indeed, economic sanctions seemed to be increasing in severity almost by the week, but the almost shocking realization, finally—on the part of the government as well as the people—that the sanctions would make life significantly more difficult for all Iranians was when the UK sanctioned the Central Bank, leading to an abrupt drop in the value of the rial and, of course, the vengeful attack on the British embassy and the compound in Qolhak. I am certainly no economics expert, so I really could only observe the effect of the sanctions on ordinary life, and ordinary people, and I would say the economy—almost always rife with mismanagement from the top down—hardly changed, nor did it respond in any effective way to the imposition of possibly the most severe economic penalties in the Islamic Republic’s history.

The rhetoric from the government has also almost remained unchanged; rhetoric (with a few notable voices of dissent) that Iran will not only survive but will actually prosper in the face of adversity. Given their experiences and sophistication, it is a line that is bought less and less by Iranians – even among regime supporters—and there is a sense that there is little the government or the regime can actually do to mitigate the effects of the sanctions. So the economy plods on, largely supported by the income from oil exports and the vast foreign exchange reserves the regime still holds. Always a cash economy (with the exception of business loans promoted by the explosion of private banks in the country), it remains so; and while there is tremendous wealth in the country, the response to sanctions from the business community has seemed to be to try to continue as before to the best of its ability, and, at times, to complain.

Q: How have economic sanctions affected the average Iranian?

HM: Average Iranians have been affected in many ways. Firstly, there is the fear of inflation, which has returned to previous highs, partly due to sanctions and partly due to the implementation of the Purposeful Subsidies (cash payments to Iranians to compensate for lifting subsidies on food items and fuel), which has resulted in people hoarding gold and foreign currencies to hedge their bets. Taking dollars out of the economy means less dollars are available (again, as cash), and has led, for example, to government restrictions on how much American money is available to Iranian travelers. Like the United States, in Iran many consumer goods are manufactured overseas, from China to Turkey to Germany, and the availability of those goods declined while I was there (or there were temporary shortages), leading to frustration on the part of consumers. With more sanctions, especially EU sanctions and banking sanctions adhered to even by Iran’s trading partners, such as the UAE, there is less investment in the country and its infrastructure, fewer business opportunities, less trade, and difficulties in maintaining any relationship with international partners.

While one might think this only affects big business—which we rarely feel sorry for—the reality is that it affects blue collar and white collar employment too, as businesses close or lay off workers, and as opportunities for growth diminish. Even non-manufacturing businesses, such as the insurance industry, are suffering because of lost international opportunities and will either reduce their workforces or in some cases, abandon their business altogether. Iran has always been a trading nation and has always maintained economic ties with its neighbors as well as the world at large. Cutting those ties will mean higher unemployment and rampant inflation, to say nothing of the relatively minor inconveniences—such as an inability to fund a student’s studies abroad or even to maintain a non-rial bank account—that middle and upper middle class Iranians now face. Even solutions to some of Iran’s intractable problems, such as pollution in the big cities, require some level of foreign expertise and goods (such as additives for gasoline imported by Iran to make cleaner burning fuel), and losing these is a less obvious but nonetheless devastating, at least to the health of the population, effect of draconian sanctions.

Q: Recently, Iran announced its desire to return to the negotiating table. How do you think the economic sanctions affect Iran’s negotiating strategy? Do you think Iran’s decision to reopen talks signals the success of the sanctions program?

HM: I do not think Iran’s desire to return to the negotiating table is purely because of the new sanctions, or the threat of an oil boycott, although these factors have indubitably played a part. Iran always indicated its willingness to negotiate, at least if it is treated with respect and if negotiations are on equal ground, so this return to negotiating is not necessarily a new thing. Of course, with the pressure being felt—despite the rhetoric the government is well aware that both it and the Iranian people are suffering—negotiations to forestall even more sanctions, or to resolve the nuclear issue once and for all take on an urgency that perhaps did not exist before. But given the political climate in the United States—which is in an election year—and given that Iran cannot afford to capitulate to Western demands due to its own political climate, I think the strategy for Iran will be to stall as long as possible, perhaps hoping to divide the powers and to gain some sympathy from China, Russia and non-Western trading partners, in order to survive 2012 in the hope that either a second-term U.S. president will be able to make a deal favorable to Iran, or that a new president—particularly a hawkish one—might be less able to convince allies to go along with either a regime-change policy or a sanctions regime designed to bring the nation to its knees.

Q: Much has been made of the Iranian government’s efforts to sell the nuclear program to the people as an issue of Iranian sovereignty. In light of this, do you believe that, in the unlikely event that it chooses to do so, the Iranian government could sell the people on foregoing the country’s nuclear program?

HM: I doubt it. The strength of the regime depends very much on its ability to project that it is a defender of Iran’s national interests, and is beholden to no foreign power. In addition,  a regime that can successfully stand up to the West is not a regime protestors on the streets want to challenge, so in almost any analysis it seems that telling the Iranian people that they have suffered in vain to protect their sovereignty will weaken the regime to the point of extreme vulnerability. In the end, self-preservation is paramount to any regime.

Q: Some commentators believe that an attack on Iran would set-off a revolution and bring about regime change in the country.  How do you think the Iranian people would react to an American (or Israeli) attack on Iran?

HM: No one can accurately predict what might happen if there is an attack on Iran, but I would disagree with the theory that a military attack can be the spark for a revolution. Firstly, Iran is not in a pre-revolutionary state and the opposition is extremely weak and disorganized (both inside and outside the country). Secondly, based on my own experience and with the assassinations of Iranian scientists (one of which I was there for) and mysterious explosions in the country (I was there then, too), and the harshly negative reaction of ordinary Iranians (from pro- to anti-regime) to those violent acts which were presumed to be the work of foreign agents, Iranians are unlikely to look at a foreign attack on their sovereignty—or even harsh sanctions that make life miserable—as the salvation they have been waiting for. Quite the opposite, I would say that their ghoroor (or pride) is offended by foreign intervention in their affairs, and that their innate nationalism trumps any desire they may have to see radical change in the political affairs of their country.

I would venture to say that a military attack by the United States or Israel will be viewed in almost purely nationalistic terms. Whatever affection Iranians hold for America will diminish to the point of disappearing, while the general antipathy they exhibit towards Israel (ordinary Iranians, regardless of their political persuasion harbor a dislike of the Israeli government and its treatment of the Palestinians, but not of Israelis themselves) will turn into genuine hatred of the Jewish state—more akin to the kind of hatred that many ordinary Arabs, say in Egypt, harbor and which Iranians have not exhibited, at least so far. In my opinion, a military attack on Iran would put the final nail in the coffin of reform and change, and would ensure a hard-line Islamic regime for years to come, probably with the support of a sizeable portion of the population that would drown out any voices of even mild dissent.

* Hooman Majd is the author of “The Ayatollah Begs to Differ: The Paradox of Modern Iran” and “The Ayatollahs’ Democracy: An Iranian Challenge.” He just returned from a yearlong stay in Tehran and is writing a new book about Iran.

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